WVU microeconomics homework 1

what are the steps to developing a model?

1. Decide on the assumptions to use. 2. Formulate a testable hypothesis. 3. Use economic data to test the hypothesis. 4. Revise the model if it fails to explain the economic data well. 5. Retain the revised model to help answer similar economic questions in the future.

Trade-offs force society to make​ choices, particularly when answering the following three fundamental​ questions:

1. What goods and services will be​ produced? 2. How will the goods and services be​ produced? 3. Who will receive the goods and services​ produced?

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls Part 2 A. scarcity. B. rationality. C. the market. D. economics.

A

What is a market?

A market is a group of buyers and sellers who trade a good or service.

what is an entrepreneur

A person who organizes, manages, and takes on the risks of a business.

what is an economic model?

A simplified version of reality used to analyze real-world economic situations so that firms or the government can use them to make decisions

what are services

Actions or activities that one person performs for another

what is a mixed economy

An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

Whose opportunity cost was higher, Anne's or Bobs? Why?

Anne's opportunity cost was higher than bobs because for every 1 banana she produced, she gave up three fish. For every 1 banana, bob gave up one fish.

explain opportunity cost with working for apple and making a salary of 100,000k and deciding to leave them to start your own firm.

Apple pays you a salary of 100k, but you decide to start your own firm. The opportunity cost is the 100k you give up by not working there anymore even if you do not pay yourself. opportunity cost often does not involve actual payments of money. The 100k is the highest valued alternative to be able to engage in your new firm.

Question content area Part 1 Microsoft charges a price of​ $599 for a copy of Windows 7. Is this pricing decision​ rational? Part 2 A. We cannot assume that this pricing decision was rational because we do not have enough information to make an assumption. B. ​Microsoft's choice cannot be​ rational: the price is clearly more than most people are willing and able to pay. C. ​Microsoft's choice was​ rational: the price will maximize profit. D. When we assume the managers at Microsoft have used all available information and have weighed all known benefits and​ costs, we are assuming rationality.

D

why does economics use a social science?

Economics is a social science because it applies the scientific method to the study of the interactions among individuals. Because economics is based on studying the actions of​ individuals, it is a social science. As a social​ science, economics considers human behaviorlong dash—particularly ​decision-making behaviorlong dash—in every​ context, not just in the context of business. Next question

marginal cost

Extra cost of producing one additional unit of production.

explain opportunity cost with the banana and fish example?

For every 10 bananas, Anne can catch 30 fish. To produce 1 banana anne will give up three fish. opportunity cost is when the highest valued alternative is given up in order to engage in another activity. so if anne produces one banana, then her highest valvule alternative, the 3 fish, are given up in order to engage in her banana production.

What is an example of trade off between efficiency and equity

For example, some people support raising taxes on people with higher incomes to provide funds for programs that aid people with low incomes. Although governments may increase equity by reducing the incomes of people with high incomes and increasing the incomes of people with low incomes, these policies may reduce efficiency. People have less incen-tive to open new businesses, work hard, and save if the government takes a significant amount of the income they earn from working or saving. As a result, fewer goods and services are produced, and less saving takes place.

what is invention

Formulation of new ideas for products or processes

In the united states, who receives the goods and services produced depends largely on

In the United​ States, who receives the goods and services produced depends largely on how income is distributed. Individuals with the highest income have the ability to buy the most goods and services.

Minimum wage legislation is

Law designed to ensure that every employee is paid a minimum amount of money

what is a rational person?

Rational individuals weigh the benefits and costs of each action and choose an action only if the benefits outweigh the costs.

What is a rational decision ?

Rationality is the assumption economists make that consumers and firms use all available information as they act to achieve their goals. Rational individuals weigh the benefits and costs of each​ action, and they choose an action only if the benefits outweigh the costs.

What is the marginal benefit and cost if you should watch another hour of you tv show or spend that hour studying?

Should you watch another hour of television or spend that hour studying? The mar-ginal benefit of watching more television is the additional enjoyment you receive. The marginal cost is the reduction in your test score from having studied a little less.

what is one centrally planned economy?

Soviet union

Marginal Benefit (MB)

The additional benefit received from the consumption of the next unit of a good or service. the activity

Discuss the marginal benefit and marginal cost of opening Disney world during covid? what was the company's goal in reopening?

The companys goal in reopening was to reduce the size of the loss even if it was not able to earn a profit. During covid, Disney world has to shut down their theme park due to covid. Even though the theme park was closed, they still had to pay for utilities, maintenance, and wages for some of the employees. They were spending money even if they were not making any due to the park being shut down. Later, the company used marginal analysis to decide to reopen the park. The company's cost would increase due new guidelines being implemented so it would be less likely for someone to contract the virus. So as long as the additional revenue the company earned from the park being opened was greater than the additional cost to keep the park opened, then they should reopen disney

discuss optimal decisions made at the margin

The__________ decision is to continue any activity up to the point where the marginal benefit equals the marginal cost = ()

what is an example of how firms will produce the goods and services? Use the worker and machine example.

They use trade- offs between using more workers and using more machines

When the federal government crafts environmental policies that make it less expensive for firms to follow green​ initiatives, Part 2 A. the policies are consistent with economic incentives. Your answer is correct. B. pollution is likely to increase. C. the policies are likely to be more successful than policies that cost firms​ more, but they do not recognize economic incentives. D. the policies are futile because where the environment is​ concerned, it has been repeatedly shown that firms do not respond to economic incentives.

a

What is scarcity? Why is scarcity central to the study of economics

a situation in which unlimited wants exceed the limited resources availability to fulfill those wants

What does marginal mean?

additional or extra

What is a market economy?

an economy in which the decisions of households and firms as they interact in markets determine the allocation of economic resources

What is a centrally planned economy?

an economy in which the government decides how economic resources will be allocated

why is voluntary exchange good?

because both the buyer and the seller are made better off because the buyer would not have agreed to buy the product and the seller would not have agreed to sell it

why are markets efficient?

because they tend to promote competition and facilitate voluntary exchange

why are values of judgement bad in forming a hypothesis?

because you can not dis prove them

a hypothesis can be correct or incorrect?

both

Any model is based on making assumptions because Part 2 A. we cannot analyze an economic issue unless we reduce its complexity. B. models have to be simplified to be useful. C. both a and b. D. neither a nor b.

both a and b

What is voluntary exchange?

both the buyer and the seller of a product are made better off by the transaction

A market is a group of of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

______________will result in firms continuing to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production. In this way, the mix of goods and services produced will match consumer preferences.

competition

what is positive analysis

concerned with what is

what is household

consists of all persons occupying a home

Who decides what goods and services will be produced?

consumers, firms, and government

how does the government decide what goods and services are produced?

for example, the government must choose what to spend their money on such as on breast cancer research or repairing highways

what are behavioral assumptions for economic models?

how to make motives of customers and firms. customers will buy goods that will maximizes their satisfactions and firms will use assumptions to maximize their profits

how do firms help decide what goods and services are produced?

in response to customers choices, lets say apple must choose whether to devote the scarce resources to making more iphones or more computers

what does marginal analysis mean?

involves comparing marginal benefits and marginal costs. marginal benefits = marginal cost

what is normative analysis

is concerned with what out to be

what is innovation

is the practical application of an invention

What is economics?

is the study of the choices consumers, business man-agers, and government officials make to attain their goals, given their scarce resources.

how does inefficiency arise in products and cost?

it can take firms a long time to be able to figure out how to make a good or service at a low cost and how to efficiently produce a product

In market economies, who decides what will be produced?

mainly the customers bc they must meet the needs of the customers or firms will go out of business

what type pf economics are more efficient than centrally planned economies? why?

market tend to be more efficient because they promote competition and facility voluntary exchange

A hypothesis is an economic model that

must be tested before it can be accepted, statement that may either be correct or incorrect about an economic variable, and usually about a casual relationship

productive efficiency

occurs when a good or service is produced at the lowest possible cost

allocative efficiency

occurs when production is in accordance with consumer preferences.

Who will receive the goods and services produced?

people with higher incomes obtain more goods and services

how is positive analysis and normative analysis used in the minimum wage model on why economic analysis has shown the minimum wage law is a bad idea and causes unemployment

positive analysis in the scenario states that the minimum wage law causes unemployment.. it shows the consequences of a particular policy but it cannot tell us whether it is good or bad. normative tells us what should be so and tells us how people evaluate the trade off

what do markets primarily rely on to produce good and services and to decide how to produce them?

private firms

what are the two types of efficiency?

productive and allocative

what are examples of markets?

smartphones, houses, haricuts, stocks, and labor

Describe ways of government intervention

social security, minimum wages, protecting the environment,

what is an economic variable

something measurable that can have different values, such as the number of people employed in manufacturing

economic variable is

something that can be measured by different values such as the number of people

what are goods

tangible products

How does the government intervene with distribution of income more equal

taxing individuals with higher incomes a larger fraction of their income because the government makes payments to people with low incomes and provides services to them, such as Medicaid medical insurance and assistance in buy-ing food through the Supplemental Nutritional Assistance Program (SNAP).

what is profit

the difference between its revenue and its costs. Economists distinguish between accounting profit and economic profit.

What is equity?

the fair distribution of economic benefits

what is social security system

the government provides payments to retired and disabled workers. this was established during the great depression

Explain centrally planned economy

the government will decide what goods are produced, how the good are produced, and who will receive goods that are produced.

What is opportunity cost?

the highest valued alternative that must be given up to engage in an activity

what are trade offs?

the idea that because of scarcity, producing more of one good or service means producing less of another good

Who determines where good and services are produced and where they are produced in a market economy?

the market, not government

what is technology

the process it uses to produce a good or service

what is microeconomics

the study of how households and firms make decisions and how they interact in markets

What is macroeconomics?

the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

what tis revenue

total amount received for selling a good or service

for a triangle or rectangle, how do we get total revenue (area)

we use base times height or the area that is shaded under the rectangle area of a triangle we use 1/2 base times height or base times height divided by 2

how do consumers help decide what good and services are produced?

when we chose to buy certain items over other items such as an iphone over a samsung or a mocha instead of a coffee

What is scaracity?

which means that although our wants are unlimited, the resources available to fulfill those wants are limited.

how don we test an economic variable

with a hypothesis

do economist use the terms firm, company, and business interchangeably?

yes

what is an example of scarcity

you might want to own a BMV and a condo near the beach, but unless you live close to the beach or generous relative, you may lack the funds for these wants.